House prices edge up in a soft market

City A.M. Reporter
HOUSE prices nudged up last month, beating expectations for no change, driven by sales in more affluent areas, data from mortgage lender Nationwide showed yesterday.

House prices rose 0.4 per cent in October having risen 0.1 per cent in September, pushing them 0.8 per cent higher than a year ago, the first time annual house price growth has been in positive territory for six months, Nationwide said.

“Given the challenging economic backdrop, October’s data is encouraging, but it doesn’t fundamentally change the picture of a housing market that is treading water,” said Robert Gardner, chief economist at Nationwide.

Data released on Monday showed a slowdown in mortgage lending with approvals of home loans -- a gauge of house prices six months down the line -- and net mortgage lending weakening in September, pointing to a further softening in the housing market.

Howard Archer, an economist at IHS Global Insight said the underlying trend “remains soft”.

He added: “We maintain the view that house prices are likely to fall by around five per cent from current levels by mid-2012 in the face of low consumer confidence, persistently weak economic activity, rising unemployment and muted earnings growth.”

He said these factors would likely outweigh the boost to the housing market coming from the extension of very low interest rates.

Meanwhile, the average price of a London home slipped by 1.9 per cent in the three months to the end of September to £295,024, according to Nationwide. although prices are still up 0.5 per cent compared to this time last year.

Although the capital is still the most expensive region in the country to buy a house, there are large differences between boroughs, Nationwide said.

In Hammersmith and Fulham, one of the most expensive areas in London, prices have gone up by 12 per cent compared to last year, while Ealing homes are five per cent cheaper on average.

The average UK price is £165,650, Nationwide said.